Company Taxation

Companies which are resident and domiciled in Malta are taxable on their worldwide income. On the other hand, companies which are either domiciled but not resident or resident but not domiciled are taxable on their Malta source income and capital gains and on foreign source income which is received in Malta.

The basis on which company tax is charged is the net accounting profit shown in the company’s audited accounts adjusted to take into account tax depreciation and deductions. Tax losses may be carried forward and offset against future profits without any time limitation. Companies forming part of a group may benefit from group relief provisions in respect of allowable losses which are surrendered in favour of the claimant company.

Malta operates a full imputation system of taxation. When a Malta registered or resident company distributes a dividend, it deducts tax from the dividend at the rate paid by the company. When the dividend is then taxed on the shareholder, it is taxed at the gross amount and the taxed paid by the company is credited against the shareholder’s total tax liability. When paying out a dividend, the company retains 35% of the gross amount. The shareholder has the option not to declare this dividend if his tax liability is within the 35% bracket which is the highest rate of personal tax. Shareholders may elect to apply for a refund of the tax paid by the company.

Malta has negotiated tax treaties with a significant number of countries. The treaties are drawn up on the OECD model with some variations in a minor number of agreements. In those instances where a double tax treaty is not in force, Malta allows unilateral relief in respect of income which has suffered tax overseas. The flat rate foreign tax credit is another form of double tax relief and is available to Maltese companies in respect of income or capital gains from abroad and which has been allocated to the foreign income account